Hundreds of square kilometres of prime agricultural land in southeast Queensland are at risk from a cocktail of toxic chemicals and explosive gases, according to a secret State Government report.

A study commissioned by Queensland's environment department says an experimental plant operated by mining company Linc Energy at Chinchilla, west of Brisbane, is to blame and has already caused "irreversible" damage to strategic cropping land.

The department, which has launched a $6.5 million criminal prosecution of the company, alleges Linc is responsible for "gross interference" to the health and wellbeing of former workers at the plant as well as "serious environmental harm".

The 335-page experts' report, obtained by the ABC, has been disclosed to Linc but not to landholders.

It says gases released by Linc's activities at its underground coal gasification plant at Hopeland have caused the permanent acidification of the soil near the site.

Experts also found concentrations of hydrogen in the soil at explosive levels and abnormal amounts of methane, which they say is being artificially generated underground, over a wide area.

Other documents, released to the ABC by the magistrate in charge of the criminal case, show four departmental investigators were hospitalised with suspected gas poisoning during soil testing at the site in March.

"My nausea lasted for several hours. I was also informed by the treating doctor that my blood tests showed elevated carbon monoxide levels (above what was normal)," one of the investigators said.

High levels of cancer-causing benzene were detected at the site afterwards.

Landholders banned from digging in 300 square kilometre zone

Earlier this year the State Government imposed an "excavation exclusion zone" on 314 square kilometres around the Linc facility where landholders are banned from digging any hole deeper than two metres.

It told landholders there were no immediate concerns with air and water quality in the region.

The wide-ranging investigation, by consultants Gilbert & Sutherland with help from scientists at the University of Queensland, included the examination of air, water and soil samples as well as records seized during raids by department investigators on Linc Energy's offices.

What is UCG?

Underground coal gasification is a so-called "unconventional" means of extracting gas from coal seams that are too deep to mine. Coal is burned in situ underground and the gas produced is siphoned off through wells.

It differs significantly from CSG production, which involves drawing enough water to reduce the pressure underground to release the naturally occurring methane in the coal seams.

UCG technology was first proposed in the 19th century but was only adopted seriously after World War II in Russia and former Soviet client states.

Benefits of UCG include the fact that landscapes remain relatively unscathed compared with conventional mining, emissions are low and the gas produced can be used for power generation or condensed to make liquid fuels such as diesel.

Disadvantages of UCG are that it is sensitive to local geological conditions, expensive to set up, and the technology is highly specialised and poorly understood by regulators.

The authors allege Linc mismanaged the underground burning of coal seams at Chinchilla, causing the release of contaminants into the soil, air and water.

They claim Linc injected air into underground combustion chambers at pressures that were too high, causing the rock surrounding the coal seam to fracture and allowing the escape of toxic gases.

"Not only was the pressure high enough to fracture the coal seam, it was also high enough to fracture the overburden," the authors wrote.

"Once this fracturing had occurred, it was unsafe to ignite the coal seam."

The consultants said they had found "volatile organic compounds, which are known carcinogens, and 'bulk' gases, which at high enough levels, can cause health and safety risks" in an area of up to 320 square kilometres around the Chinchilla plant.

"We have found gases in quantities above the explosive limit. In our reconnaissance boreholes, explosive levels have been found that indicate very much higher concentrations in the soil atmosphere," the consultants reported.

The consultants hired scientists at the University of Queensland to recreate conditions underground at Hopeland in the laboratory, using coal from the same seam and subjecting it to extreme temperatures to obtain an isotopic "fingerprint" to rule out other sources for the contamination.

In a statement to the ABC, Linc Energy strongly rejected the department's allegations that it had caused serious environmental harm and said the department had "commenced these proceedings without sufficient scientific evidence".

The environment department's investigation is the biggest in its history: more than 100 investigators are working on the case.

"(Linc) wilfully and knowingly undertook the operation and they... knew that this could lead to catastrophic events," the department's director-general Jon Black said.

Linc said naturally occurring sub-soil processes were the most likely cause of the gases detected by the department, and the investigation represented a "monumental mishandling of Queensland's strained financial resources".

Former workers have told the ABC that during their time at Linc, gas alarms sounded frequently, there were gas leaks from wellheads and from the ground, and they often suffered headaches and sickness.

In statements to department investigators, two workers claimed they resigned over health concerns that were ignored by the company.

"Well into my time at Linc I began to suffer chest pain and flu-like symptoms. These symptoms included general aches. I recall a lot of us had similar complaints," one worker said.

"I often felt unwell on site — headaches, feeling ill in the stomach," another said.

"When you were working at night when there was no breeze, your personal gas detector would be constantly alarming to the extent that I'd get in my vehicle and drive off site for a few kilometres before it would stop alarming.

Linc told the ABC such allegations were "offensive", adding that it had not received any complaints regarding workers' health since 2008.

The environment department has asked Linc for $22 million in additional financial guarantees to cover the cost of cleaning up the water and sediment in several storage dams at the facility, which the department claims are "likely" to be contaminated with dioxins and other pollutants.

Linc is refusing to provide the guarantee and has taken the matter to the Land Court. Filings show the company has told the department the demand is unreasonable and unfounded.

It has also said it cannot raise the amount in cash and would need to completely restructure its global debt to pay such an amount.

According to the environment department's website, it plans to give people in Hopeland further "feedback on the investigation" into possible soil, water and air contamination in September.